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Coping with COVID-19: An Update for Division I Collegiate Athletics

Athletics finance officers’ heads are spinning right now about the current and future state of collegiate athletics. First and foremost, they’re responding to the health, safety and resource needs of their student-athletes as they transition to a new environment of virtual learning and social distancing. Then throw in the significant financial impacts that have occurred in the span of the past few weeks—and will likely continue in the foreseeable future.

Last week the NCAA announced its plan for 2020 revenue distribution, which quantifies the financial impacts the industry is facing due to the cancellation of March Madness. The $225 million distribution to Division I members is down from the $600 million budgeted to them. And for the nearly 350 colleges and universities in Division I, this means an approximate average shortfall of $1 million per school.

While the timing of distribution has been delayed from April to June, the allocation methodology is not yet clear because there is no tournament bracket to determine unit distributions. Some schools we’ve talked to anticipate more than a $2 million cash shortage.

By itself, this shortfall could be manageable for the larger DI institutions. But collegiate athletics finance officers aren’t only concerned about the cancellation of March Madness. Other factors should be considered in the wake of COVID-19 that will have significant financial impacts to athletics programs large and small across the country.

Additional Year of Eligibility

The NCAA is still finalizing the details on granting eligibility relief to student-athletes who compete in spring sports. This could allow athletes an additional year of participation.

This leads to many questions that make predicting the financial impact difficult.

  • Will there be relief to scholarship limits?
  • Will institutions grant tuition waivers for graduate school for those returning seniors who have graduated?
  • Will the Office of Civil Rights grant exceptions if this creates an equity imbalance, or could there be federal fines imposed for violation of Title IX?

One Group of 5 finance offer we talked to indicated that spring seniors at undergraduate rates could add an extra $300,000 expense to their bottom line for one additional year of eligibility.

Economic Impact on Donors

The economic impact of COVID-19 will drive spending of discretionary income by donors, and schools are expecting a decline in capital and booster contributions. Schools rely on these donations for scholarships, facilities upgrades, payment of outstanding debt and other operating expenditures.

Institutions have historically transferred funds to athletics to cover these cash outflows. But many universities are being hit with significant housing and dining refunds to students required to leave campus early. So the likelihood of athletics receiving institutional support has declined.

Potential Cancellation of Football

This is difficult to even think about right now, but it’s a real fear that the outbreak will not be contained by this fall. That leads to significant safety concerns for both athletes and fans. Even if things get back to normal this summer, football season could be delayed to allow athletes to catch up on strength and conditioning required for healthy participation. Significant media revenue that was considered guaranteed only a few weeks ago might disappear or be greatly reduced. Ticket sales and other football revenues will also see a significant reduction. And while most football-related expenses will also decline, an athletic department’s biggest line item—football coach salaries and benefits—won’t go away.

Measuring an uncertain future is challenging. Now combine these factors with the communication gaps between the NCAA, conferences and institutions. So finance officers are working hard to defend their athletic departments as decisions are made.

But that’s not enough. Frankly, athletics CFOs should be attached to the hip with their athletic directors (with a six foot chain, of course). As impactful financial decisions are made, CFO voices should be heard—both within the institution and across the country—to drive necessary proactive and strategic change for the long-term financial health of college athletics. And we have seen financial leaders make their way to the front lines to help manage this crisis.

We are here to help. The James Moore Collegiate Athletics Team is assembling a think tank of college athletics CFOs across the country to share ideas, develop best practices, write the true financial story, and influence decision-makers. We will continue to be your resource and ally during this increasingly difficult time.

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